What Does "Forfeited Corporate Entities" Mean?

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When a state government labels a corporation as "forfeited," that's bad news. A forfeited corporate entity loses its right to operate in that state. In California, for example, the corporation can't defend against a lawsuit or enforce its contracts, and loses the right to its business name. It still has to pay any taxes or fees it owes the state, though. States pursue forfeiture for different reasons, such as when a company misses filing certain paperwork or information with the state. For example, any corporation in business in Maryland must file a report on its Maryland personal property by April 15 each year. This is mandatory even if the company doesn't own any Maryland personal property. If a corporation doesn't file this report, the state might begin the forfeiture process.

Forfeiture Isn't Forever

Forfeiture doesn't happen without warning. The State of Maryland, for example, notifies companies a few months in advance that they face possible forfeiture. This gives them a chance to fix the problem. Some companies might just let forfeiture proceed if they have already stopped doing business in the state. All forfeiture does is stop business operations, so there's no added penalty for letting the company's active status lapse. A company can prevent forfeiture after notification or reinstate itself even after forfeiture takes effect. Doing this requires catching up on missed paperwork filings, late payments or fixing whatever problem brought on the forfeiture.

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